SDG 13 - Climate action

The burning of fossil fuels is a one-way street that is not sustainable. Experts around the world are searching for alternatives, and investments are being made in new technologies to cover the growing energy requirements with climate-friendly sources. This is where many developing countries are at an advantage; they are not yet fully exploiting the use of the enormous renewable energy resources they have. KfW wants to drive transformation forward and is actively financing infrastructure to tap into these renewable energy sources. It is financing projects like the largest solar power plant in Africa to date in Ouarzazate, Morocco, wind farms in Egypt and Bosnia-Herzegovina and geothermal power plants in Indonesia and Kenya.

But power is not always produced where it is needed, and the supply of energy from renewable sources naturally fluctuates – so sufficient grids and storage capacity are required. In India, for example, KfW is supporting construction of “green corridors”, which are expansive routes used to transport power to the country’s economic centres. But the most environmentally friendly energy is the power that is not needed in the first place. So KfW also promotes the more efficient use of energy. For example, it supports the construction of eco-houses for poorer families in Mexico – now home to more than 100,000 people – or the energy-efficient refurbishment of public buildings in Montenegro (PDF, 98 KB, non-accessible). KfW Development Bank has committed more than EUR 4.4 billion for investments in all these areas over the past three years.

Closely linked to the energy transition is the necessary transport transition. After all, the transport sector is responsible for around a quarter of global CO2 emissions. So KfW is promoting environmentally friendly, electricity-based means of mass transport such as subways, commuter trains and metros, for example in Brazil, Tunisia and India, but also non-motorised transport such as in the form of bike paths in South Africa or Peru. KfW believes that creating sustainable mobility systems that seamlessly coordinate transport methods and integrate them in targeted urban planning is one of the most urgent tasks in the coming years.

The growing global population’s increasing demand for food, water, commodities, housing and mobility cannot be met in the current way without destroying existing ecosystems. The solution can therefore only be to reconcile economic development with climate and environmental protection. So KfW is investing in a sustainable development trajectory and promotes, for example, forest conservation, which plays a key role in climate and nature protection. KfW supports reforestation programmes such as the ones in Madagascar or Vietnam, as well as agroforestry systems, such as cocoa or coffee cultivation, which play an important role in combining forest protection and sustainable use. And KfW supports compensation programmes that provide incentives for forest conservation, for example in Ecuador and Colombia.

It is now undisputed that global warming, the destruction of ecosystems and the danger of pandemics are inextricably linked and must therefore be tackled together. The trend of rapid species extinction must be reversed, also as a means of climate protection. The best way to do this is through well-managed protected areas, if they closely involve the local population. KfW established the Legacy Landscapes Fund (LLF) on behalf of the German government for precisely this purpose. It finances protected areas and their surrounding areas in poor countries. The idea behind the LLF is as simple as it is compelling: if it succeeds in preserving as many species as possible in biodiversity-rich but low-income areas of the world, a good part of the biodiversity that is essential for survival will be secured for the whole world – and thus also for the climate and adaptation. Through the participation of private donors, the LLF can help close the large funding gap in nature and climate protection. Another important concern at KfW is global marine conservation. The world’s oceans are not just a significant carbon sink, they also provide a source of food and income for billions of coastal inhabitants. Charitable trusts and initiatives co-founded by KfW like the Blue Action Fund (BAF) or the Clean Oceans Initiative (COI) promote conservation areas, sustainable fishing, environmentally friendly tourism and fighting plastic waste.

Despite all efforts to curb or store climate-damaging gases and preserve ecosystems, the Earth’s temperature will continue to rise. So in addition to climate-friendly development, adjusting to climate change is also a focus area. Here, KfW is investing in projects such as coastal protection in Tunisia to keep the land from being flooded.

It will be necessary to reorganise every area of life – from power production, to transport and agriculture, to building construction – if we are to substantially limit global warming. Large investments will be needed; the Intergovernmental Panel on Climate Change has estimated that around USD 2.4 trillion will be needed in the energy sector alone. In addition to proven instruments, innovative instruments will also be necessary to mobilise these funds. KfW works with these instruments, such as funds for green companies or insurance against consequential losses from extreme weather conditions due to climate change, such as the African Risk Capacity (ARC). KfW also issues green bonds – bonds that mobilise private capital, the proceeds of which are used for climate and environmental protection projects. Since 2014, KfW has issued green bonds in the amount of more than EUR 50 billion. This makes it one of the largest issuers worldwide.

To make the financial world greener, KfW participates in associations with other financial institutions like the International Development Finance Club (IDFC). This has brought together 27 development banks with a joint vision of a sustainable future and less poverty throughout the world. Between 2015 and 2021, they committed a total of USD 1.3 trillion for green financing.

In addition, KfW set itself the goal of an even more consistent focus on sustainability. With the group-wide project "tranSForm" in the area of Sustainable Finance, it has initiated trend-setting changes that focus on the contribution of financing to a sustainable and climate-friendly transformation of the economy and society. Among other things, KfW is anchoring SDG contributions and Paris compatibility even more strongly in its financings. 2020 also saw the introduction of climate mainstreaming in KfW Development Bank. This means that all climate effects and risks will be analysed at the early design stage of every project so that these can be systematically accounted for in the project design. In this way, the project’s effectiveness in terms of climate protection can be further increased and possible risks can be addressed more effectively. Risk-mitigating measures can thus be even more deeply integrated into the entire FC portfolio.